Report No. 128
Advocates' Fees
2.3. In assigning the top place to advocates' fees as a component of cost of litigation, the Law Commission is influenced by the fact that members of the top echelons of legal profession charge fees for services rendered by them which is not available on a comparative basis in any other profession. In the corridors of Bar Association, it is freely whispered, and without the identity being disclosed, the Law Commission was informed, that the top members of the legal fraternity in the Supreme Court charge more often at the rate of Rs. 1,00,000 per day of four and half working hours.
A fee varying from Rs. 5,000 to Rs. 15,000 for appearing in a matter set down for admission has become common place; and senior advocates coming from the top echelons of the Bar are known to be appearing in 5 to 10 admission matters per day on an average. And this fee either for final hearing per day or per admission matter does not include conference fee. The minimum fee for giving written opinion varies from Rs. 5,000 per opinion to a conference fee of Rs. 5,000 per hour. Ordinarily, big industrial and commercial houses and corporations and companies have been paying and are willing to pay the fees on this scale. Then it slowly tapers down to a level where the competition is fierce and the charges are the lowest.
2.4. Payment in the higher bracket is further encouraged by a peculiar provision in the Income-tax Act. Section 37(1) of the Act provides that any expenditure [not being expenditure of the nature in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of society] laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'profits and gains of business or profession'.
This provision has come in for interpretation on numerous occasions before the Privy Council, Supreme Court, various High Courts and income Tax Appellate Tribunal, and expenses on litigation have been put under the heading 'permissible deduction' in computing the profits and gains of business or profession.
The case are a legion to be mentioned here but a ready reckoner is available.1 But practically every class of litigation concerning the business or profession of the assessee has enjoyed the benefit of exemption and without a ceiling. This provision has pushed up lawyers' fees in cases where corporations/companies are involved in litigation and it has almost become the corporations'/companies' largesse distribution method. And the largesse is enjoyed at the cost of the State by reducing the taxable profit and enhancing the litigation.
There was also section 80VV, which has been deleted with effect from 1-4-1986 by the Finance Act of 1985, which permitted deduction of expenses incurred or litigation under the Act with a ceiling at Rs. 5,000. Shorn of verbiage, the provision means that one can fight tax authorities at State's own cost inasmuch as even if the assessee were to lose the litigation up to the Supreme Court of India' the expenses subject to ceiling are deductible while computing the total income of the assessee. Such litigants litigating at State cost have clogged the courts' dockets.
Their ability to pay high fees has so adversely affected the market of legal services and culture of legal profession that others who can ill-afford to pay fees at the high rates are compelled by the environment to follow the suit and suffer in the process. Therefore, the question of costs of litigation may be examined only from the point of view of the impoverished class of litigants who suffer double jeopardy in that they cannot afford to enforce rights by initiating the litigation for want of wherewithal and, in the process, suffer further injustice, namely, denial of rights, privileges and concessions.
1. For list of cases where litigation expenses have been held to be deductible, see Chaturvedi and Pithisarin Income-tax Law, Vol. 2, p. 1403 (3rd Edn., 1981).
2.5. Petty litigation of simple variety emanates from rural areas inhabited largely by impoverished class of rural poor. To them, more than the court fees, the advocates' fees/lawyers' charges which have to be paid in advance set up a formidable barrier in access to justice. For this class of litigants, there must be a two-pronged drive to reduce the cost of litigation under the head "lawyers' charges":
(1) The State must prescribe floor and ceiling within which only lawyers fees can be charged; and
(2) Legal aid schemes which must ensure availability of legal aid at State cost.
Both the approaches may be separately examined.
2.6. The Advocates Act, 1961, has been enacted in exercise of the powers conferred by entry 26 in the Concurrent List of Seventh Schedule to the Constitution. The Act provides for a monopoly in the sense that only those persons whose names have been enrolled in the State rolls of advocates maintained by the Bar Council of the State shall be entitled as of right to practise throughout the territories to which the Act extends, as provided in section 30. Undoubtedly section 32 confers power on the court to permit any person not enrolled as an advocate under the Act to appear before it in any particular case. Both these sections find their place in Chapter IV which appears not to have been brought into operation as yet.
If thus the Act confers a monopoly, since naturally the monopoly has an inbuilt tendency to abuse its monopolistic character, the State must have regulatory control over a monopoly. And such regulatory control may extend to prescribing the floor and ceiling in the matter of lawyer's fees. Now if by the Act of Parliament, the profession enjoys a monopoly, indisputably the Parliament will have power for regulating the conduct of the members of the monopolistic profession and, in exercise of this power, the Parliament can prescribe the floor and ceiling in respect of fees chargeable by lawyers.
Today sky is the limit. In a welfare State, the State must, in discharge of its trust to its impoverished sections of society, protect them against a highly intelligent monopolistic profession. And now that the legal charges or fees of lawyers have sky-rocketed, it is time for the State to intervene and regulate the profession by prescribing the floor and ceiling. Between the floor and ceiling, it would be open to the lawyer to negotiate his fees.
But if the litigant were to deposit the fees at the level of ceiling in an account to be maintained by the Bar Association of which the lawyer is a member, it shall be the duty of the lawyer to appear for the litigant without any further negotiation about fees. He may decline to undertake the assignments if either there is a conflict of interest or his hands are full. The lawyers describe their legal profession as a noble profession. As a characteristic of nobility, this sacrifice is expected.
2.7. There is an additional reason why the State must enforce a regulatory measure. Recently, by the Resolution No. F.8(14)/82-L.C., dated 4th July, 1985, of the Department of Legal Affairs, Ministry of Law and Justice, a Committee was set up under the Chairmanship of Justice Baharul Islam, former Judge of the Supreme Court of India to make recommendations to provide social security measures to members of the legal profession. The Committee was of a representative character in as much an there were four Members of Lok Sabha as Members of the Committee over and above the Attorney-General of India, Chairman of the Bar Council of India, a senior advocate of the Supreme Court Chairman of the Law Council of Delhi and a journalist.
This Committee was required to study in depth all the aspects relating to the measures of social security to be provided to the members of legal profession and submit a report together with its recommendations within the period prescribed. The Committee issued a questionnaire to which there was a widespread response. After the internal deliberations, the Committee recommended to provide financial assistance to the extent of Rs. 500 to junior advocates for 5 years from the date of enrolment and to those who have not completed 35 years of age special provision was recommended for the advocates belonging to Scheduled Castes and Scheduled Tribes and women lawyers.
The Committee also submitted a draft bill annexed to its report. The funding programme is evident from the draft Bill. It provides for a levy of membership fee as also levy of a stamp duty on every vakalatnama that a lawyer files in any litigation of such denomination as may be prescribed. The amount collected by the sale of such stamps will form part of the fund. In effect, members of the legal profession have to be provided financial assistance by levy of tax in the form of stamp duty.
If the profession can call upon the Government to exercise its taxing power for raising a fund to be exclusively used for the benefit of the members of the legal profession, ipso facto the State can enforce a regulatory measure providing the floor and ceiling in the matter of charging of fees. To a considerable extent, if this recommendation is implemented, the quantum of lawyer's charges will go down and it will have the desired effect of equitable distribution of legal work amongst various members of the profession and to reduce concentration of legal work in the hands of few members of the profession to the detriment of a large number of them.
These twin objects can be easily achieved by prescribing the floor and ceiling in the matter of lawyer's charges and once the litigant is willing to pay, he is entitled to the services of a lawyer as desired by him within the meaning of Article 22 of the Constitution.
2.8. Even where floor and ceiling in matter of lawyer's charges are prescribed and enforced, yet, in a poverty ridden society like ours, there will still be a large segment of potential litigants in search of its entitlements who would not be able to afford even the prescribed charges. For their benefit, the provision of Article 39A has to be fully made operational, Article 39 prescribes a duty of the State to secure that it shall provide free legal aid by suitable legislation or schemes or in any other way to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities.
The State is aware of its duty as mandated by Article 39A of the Constitution, in order to translate the mandate of Article 39A into a functioning scheme to provide free and competent legal services to the weaker sections of the society to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities, Parliament has enacted the Legal Services Authorities Act, 1987 lAct No. 39 of 1987] which received the assent of the President on October 11, 1987. Nearly eight months have rolled by since the Act has been put on the statute book but, unfortunately. It has not been brought into operation.
The reasons for this delay are difficult to discern. However it must be stated in favour of the State and the powers that be that a legal aid scheme under an executive order is at present functioning, it is a skeletal scheme. The scheme has to be all comprehensive so that anyone in any part of India who has suffered injustice by denial of entitlements or deprivation of his rights must be able without the slightest worry about his economic wherewithal, to initiate legal action for enforcement of his rights or to procure his entitlements.
The National Legal Services Authority to be set up under section 3 of the Act is under a statutory obligation to lay down policies and principles for making legal services available under the pro,visions of the Act; frame the most effective and economical schemes for the purpose of making legal services available under the provisions of the Act; utilise the funds at its disposal and make appropriate allocation of funds to State authorities and district authorities; and to take necessary steps by way of social justice litigation with regard to consumer protection, environmental protection or other matter of special concern to the weaker sections of the society and, for this purpose, to give training to social workers in legal skills.
When the scheme is made operational, even the poorest among the poor would be able to secure legal aid without the worry of finding the wherewithal for acquiring his entitlements and to vindicate his rights. In fact, expecting the members of the impoverished class of litigants to go in search of legal aid is itself a tall order. The Law Commission, being aware of the fact that the rural Poor find it difficult even to procure legal aid by approaching appropriate authorities has taken one more step to make the scheme, whatever that may be, operational.
2.9. The largest sections of the economically and socially disadvantaged classes of people reside in rural areas. For their benefit a participatory model of justice has already been recommended by the Law Commission in August 1986.1 The report recommends setting up of a Gram Nyayalaya to be manned by a legally trained Judge and two lay Judges. Apart from anything else, the Gram Nyayalaya has not to wait for people to come to it in search of justice but whenever a dispute is reported, to assemble at the site of the dispute and to resolve the same. Ours being a society founded on rule of law coupled with an adversary system, presence of lawyer in the process of assisting resolution of dispute is generally considered indispensable.
Now if the Gram Nyayalaya is to settle at the sites of dispute, how could litigants coming from the rural poor class bring their lawyers to the place where the dispute has occurred? The Law Commission being aware of this situation has recommended that to every such Gram Nyayalaya, the District authority, to be setup under the Legal Services Authority Act, 1987, shall assign two lawyers whose services would be available to either side in need of lawyer's services without obligation to make any payment.
If the rural poor are not to pay court fees in their disputes before the Gram Nyayalaya2 and will have services of lawyers assigned by District Authority under the aforementioned Act without obligation to pay,3 one can confidently say that the two major components of cost of litigation will be totally eliminated and the cost of litigation will perceptibly go-down to an extent where it will become wholly bearable.
1. LCI, 114th Report on Gram Nyayalaya.
2. LCI, 114th Report on Gram Nyayalaya, para. 6.15.
3. Id., para. 6.12.
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